Compliance Corner ‐ Billing Hospital Observa on Services

What is Outpatient Observation?

According to the Center for Medicare and Medicaid Services (CMS), observation care is a well -defined set of specific, clinically appropriate services, which include ongoing short-term treatment, assessment, and reassessment.

Observation services:

Require a significant period of treatment or monitoring in order to make a decision concerning patient admission or discharge.

Are covered only when provided by the order of a physician or another individual authorized by State licensure law and hospital staff bylaws to admit patients to the hospital or to order outpatient services.

Must be reasonable and necessary to be covered by Medicare and Medicaid.

Reporting Hours of Observation

Observation time begins at the clock time documented in the patient’s medical record, which coincides with the time that observation care is initiated in accordance with a physician’s order. Providers may not begin counting observation hours until such time as an order for observation is given.

General standing orders for observation services following all outpatient surgery are not recognized.

Observation services should not be billed concurrently with diagnostic or therapeutic services for which active monitor- ing is a part of the procedure (e.g., colonoscopy, chemotherapy).

A hospital must deduct the average length of time of the interrupting procedure, from the total duration of time that the patient receives observation services.

Observation time ends when all medically necessary services related to observation care are completed.

Inpatient to Outpatient Status Change

In some instances, patients are admitted as hospital inpatients, but upon review it is determined that the patient does not meet inpatient criteria.

If the determination occurs prior to discharge, and other criteria are met, the status may be changed to outpatient.

If the criteria are not met, the status must remain inpatient.

Only services provided per a physician order can be billed on the outpatient claim. Therefore, providers may not begin counting observation hours until such time as an order for observation is given

Example: Patient A was admitted at noon on Sunday. On Monday afternoon it was determined that the patient did not meet inpatient criteria, the physician concurred, and the status was changed to outpatient. The outpatient status is considered to have begun at noon on Sunday. However, observation hours cannot be billed until the physician has written an order for observation. If the order was written at 2 p.m. on Monday, the hospital would begin the observation hours at that time. Observation cannot be charged between noon on Sunday and 2 p.m. on Monday.

Furthermore, observation orders must never be rolled back to the date of admission.

References:

Centers for Medicare and Medicaid Services Manual System –Pub. 100-02 Medical Benefit Policy, Section 20.5 – Outpatient Observation Services

Florida Medicaid - Outpatient Hospital Services Coverage Policy

Florida Medicaid Covered Services – Inpatient Hospital Services

The Billing Compliance Department is here when you need help regarding billing, coding, documentation and/or guidance on new and changing applicable laws and regulations. You can contact the team via email at:

BillingCompliance@Nicklaushealth.org.

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